Strong Politics, Weak Prospects

Presidential Candidate Mitt Romney’s blueprint, “Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth,” includes some familiar Republican proposals for regulatory reform. Given the centrality of the economy to the 2012 campaign, it is not surprising that Romney’s ideas for regulatory policy focus on the economic costs of federal regulation. In fact, the focus on costs is unremitting, with his report citing the Small Business Administration’s estimate of the annual costs of regulations at $1.75 trillion, and other estimates such as $700,000 annual regulatory costs per manufacturing firm and $28,000 in compliance costs per employee. Romney’s blueprint notes that in 2010, a record year for the number of pages published in the Federal Register, Obama-administration agencies issued rules imposing $26 billion in annual costs.

Romney’s proposals for curbing regulatory costs include promises of unilateral presidential action and proposals for legislation. Among Romney’s promised “Five Executive Orders for Day One” is “An Order to Cut Red Tape,” directing “all agencies to immediately initiate the elimination of Obama-era regulations that unduly burden the economy or job creation.” In addition to working to repeal “Dodd-Frank” and “Obamacare,” Romney promises to “Review and Eliminate Obama-Era Regulations,” “Impose a Regulatory Cap” of a zero increase in regulatory costs, “Restore Congressional Oversight” by requiring Congress to approve major rules before they may be put into effect, and “Reform Legal Liability” by “preventing excessive damage awards, limiting class-action lawsuits . . . and empowering judges to sanction more effectively trial lawyers and parties who bring frivolous claims.”

My comments focus on two of these proposals: the imposition of a cap on new regulatory costs and Romney’s support for a statute, like the proposed REINS Act, which would not allow major rules to go into effect without Congress’s affirmative approval.

Romney’s proposal for a regulatory cap is a natural outgrowth of his focus on regulatory costs. Reading the Romney program leaves the impression that regulations impose costs with no discernible benefits. The only mention of regulatory benefits is in a statement from the CEO of a restaurant chain claiming that even if regulations seem sensible, the cumulative cost “far outweighs the benefits.” The Romney plan’s perspective on regulatory agencies seems to be that agencies impose needless regulatory burdens simply for political reasons with no genuine concern over the costs. From this approach, it is apparently almost impossible to imagine, for example, that an environmental regulation with $1 million in compliance costs might save $2 million in medical expenses or result in $2 million in benefits to the local tourism or recreation industries.

The idea of the regulatory cap is to impose a “budget-like process” under which any cost increase must be offset by decreases elsewhere. To nail down its criticism that the current system of internal review by the Office of Information and Regulatory Affairs (OIRA) is inadequate, Romney’s plan denounces as “political theater” OIRA Administrator Cass Sunstein’s proclamation that his regulatory review resulted in $2 billion in annual savings because it amounted to savings of only 0.1 percent in regulatory costs. The proposed hard cap would more effectively ensure that a Romney administration would impose no additional regulatory costs. Again, whether any regulations foregone by this cap would have resulted in net increases in social welfare is not considered. Absent any such consideration, the proposed cap might be good politics, but it cannot be said to reflect serious policy analysis. What is needed is careful identification and reform of regulations that cost more than the benefits they produce.

Romney’s proposal that major rules not go into effect without affirmative action by Congress makes a more serious point. One purported weakness of our governmental system is that delegation of broad authority to agencies allows Congress to escape responsibility for regulation. Undoubtedly, Congress sometimes delegates power to agencies to avoid accountability. From a purely political perspective, Congress must view the political gains from passing vague legislation and delegating power to agencies as worthwhile, even if agencies sometimes stray from statutes’ underlying intent, as Romney argues, or even if agency action is counter-productive for other reasons. Judging by Congress’s extremely low approval ratings, Congress may be wrong—the public may hold Congress responsible for the entire regulatory environment, whether emanating from agencies or Congress itself. More to the point, delegation occurs for many other reasons as well. Congress, under pressure from constituents, often addresses serious, large-scale problems and is not equipped to resolve technical issues or engage in the day-to-day administration of particular programs. Further, Congress does not have the time to write all of the rules that are necessary to implement complex regulatory programs. Of course, if you do not believe that these regulatory programs should exist, then allowing only those that Congress has the time, ability, and will to enact is a positive step toward reducing the nation’s regulatory burden.

The hope or expectation underlying Romney’s proposal to require Congress to enact affirmatively all major rules is probably that, as presently constituted, Congress is very unlikely to do so in many cases, even with regard to rules that make good policy sense. This aversion to new rules could slow the regulatory process to a crawl. Of course, if this is indeed the most likely outcome, then for all of the reasons that Congress delegates regulatory authority in the first place, Congress is unlikely to pass any legislation prohibiting agencies from issuing major rules without congressional approval. Romney’s program recognizes Congress’s likely resistance, so it also promises that if Congress does not enact the proposed legislation, a President Romney would issue an executive order prohibiting agencies from implementing regulations that lack congressional approval. Such an order would, in all likelihood, be illegal. While there are situations in which it is difficult to compel agencies to act, as the Supreme Court’s 2007 decision in the global warming case illustrates, agencies cannot simply refuse to adopt major rules for reasons not contemplated by Congress. If Congress instructs agencies to issue rules without further congressional approval, then the President does not have the authority to impose congressional approval as an additional condition of regulatory action.

It is also important to point out that the premise underlying the proposal to require Congress to affirmatively approve major rules—that congressional oversight is inadequate—may not be accurate. Congress oversees agencies in numerous ways, both formally and informally. Congress, through its committees and members, has required agencies to file hundreds, perhaps even thousands, of reports; it holds hearings; it rewrites legislation; it attaches riders to appropriations bills prohibiting or requiring particular agency action; it holds up presidential appointments; it “suggests” congressional staffers for presidential appointments; it subjects agency action to judicial review and adjusts the stringency of that review; and it imposes numerous procedural and substantive requirements on agency action through statutes such as the Administrative Procedure Act, the National Environmental Policy Act, the Regulatory Flexibility Act, and too many more to name. Congress’s involvement, combined with centralized review of regulations under Executive Order 12,866 and “hard look” judicial review, renders it unlikely that agencies are getting away with a substantial amount of unreasonable regulation that is contrary to Congress’s intent.

In fact, the Romney program exhibits a somewhat schizophrenic attitude toward Congress. While the program’s primary focus is on the regulatory overreach of the Obama administration, it places much of the blame on Congress for passing abominations such as Dodd-Frank and Obamacare, for delegating so much power to agencies, and for failing to provide effective oversight. Clearly, the Congressional Review Act passed into law in 1994 has failed to provide a real check on agency action. Perhaps Romney and others should consider the model adopted by many states under which a joint committee of the two houses of the legislature, with the aid of a professional staff, examines rules for sound policy and consistency with legislative intent, and has the power to delay the implementation of new rules and quickly bring bills rejecting them to the floor of the legislature for a vote. This process would mirror presidential oversight currently conducted in the Office of Management and Budget and might provide an even greater incentive for agencies to conform their rules to legislative preferences .

That the Romney proposal does not withstand scrutiny as a promising blueprint for administrative law reform should not obscure its value as a political document. If implemented as intended, Romney’s proposed plan could make it much more difficult for agencies to issue new significant rules, and it might even result in the roll-back of many rules subject to the proposal’s regulatory review plan. This potential should resonate with those who believe that the roots of America’s problems lie more in too much government than in the regulatory failures that led, for example, to the financial crisis, the passage of Dodd-Frank, and many other despised products of errant Congresses.

Jack Beermann is the Harry Elwood Warren Scholar and Professor of Law at Boston University School of Law. Before joining the Boston University faculty in 1984, Professor Beermann clerked for Judge Richard Cudahy of the United States Court of Appeals for the Seventh Circuit. In 2008, he was visiting professor at Harvard Law School and in 1997, he was distinguished visiting professor at DePaul Law School.

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David Vogel is a professor at the University of California, Berkeley where he serves in the Department of Political Science and in the Haas School of Business where he is the Solomon P. Lee Chair in Business Ethics. He is also an International Research Fellow at the Oxford University Centre for Corporate Reputation.